NEOLIBERALISM/FREE MARKET FUNDAMENTALISM ON A GLOBAL SCALE: IMPLICATIONS FOR THE WORKING CLASS IN DEVELOPING COUNTRIES

•         Femi Aborisade

•         Department of Business Administration and Management Studies

•         The Polytechnic, Ibadan

•         aborisadefemi@gmail.com

 

•       Outline

•                   Introduction

•                   Theories of Classical Liberalism

•                   1. Natural rights theory

•                   2. Utilitarianism

•                   3. Social Darwinism, and

•                   4. Economic liberalism.

•                   Failure of Economic Liberalism

•                   The Rise of Keynesianism

•                   Failure of Keynesianism

•                   The Rise of Neoliberalism or Neoclassical Liberalism

•                   Implementation of Neoliberalism

•                   The Failure of Neoliberalism

•                   The Way Forward

 

 

•       Introduction

•        Central argument: The deepening economic crisis facing the working people across the world, including those in Nigeria, is one induced by neoliberalism

•        The central theoretical issue which surrounds the whole issue of neoliberalism is: what should be the role of the state in economic development in order to ensure improved quality of living standards?

•        To provide an answer to this question, several theoretical frameworks have been advanced.

•        Liberalism is one of them

•       Theories of Classical Liberalism

•       The term, classical liberalism, refers to the earlier liberal traditions

•       Although there are variants of the idea, Classical liberalism is built on the following main theories:

•       1. Natural rights theory

•       2. Utilitarianism

•       3. Social Darwinism, and

•       4. Economic liberalism.

•       1. Natural Rights Theory

•        It holds that human rights are natural - they are invested in human beings by nature or God.

•        For Locke, if the rights of the people are violated by the government, the people have a right of rebellion

•        However, Liberalism predicates freedom and democracy on inviolability of the right to own property - free trade, free contract, etc.

•        Thus, liberalism ignores the social power of wealth and capital as a form of domination –property owners dominate the working class in the workplace

 

•       2. Utilitarianism

•         Utilitarianism is a moral principle, which holds that an action, policy, legislation, institution, etc should subsist only if it promotes happiness, not just for an individual, but also ensures ‘the greatest happiness for the greatest number’ (Bentham).

•         Other liberals however maintain that utilitarianism could result in ‘majoritarian tyranny’, which they oppose.

•         In the final analysis, liberalism places the need for law and order, property rights, over and above the right of rebellion against social policies, regardless of the utilitarian value of such policies.

•       3. Social Darwinism

•         Social Darwinism is an attempt to explain social circumstances of poverty and inequality on the basis of natural differences in individual ability, talents and willingness to work. Those who are capable and willing to work rise to the top and prosper; the indolent ones fall to the bottom and are poor. ‘heaven helps those who help themselves’ (Samuel Smiles’ 1986) and Spencer’s (1967) ‘survival of the fittest’.

•         The theory maintains that inequalities of wealth, position and political power are naturally inevitable. Any attempt to alter the natural state of inequality is an affront against nature itself. Thus, there is no rationale for government supporting the poor and disadvantaged.  ‘the drunkard in the gutter is just where he ought to be’ (Summer, 1884)

•         Social Darwinism relies on the work of Charles Darwin (1809 – 1882), The Origin of Species, which refers to the natural world in explaining a process of ‘natural selection’ by which certain species that are naturally fit survive while others die.

•       4. Economic Liberalism

•       Literally, neoliberalism refers to ‘new liberalism’.

•       To understand neoliberalism, we need to understand classical economic liberalism?

•      What is Classical Economic Liberalism? (4.1)

•        In its continental European sense, it means ‘free market economics’ or the orthodox ‘laissez faire’ economic ideology that prevailed until the great slump of the 1930s.

•        It contends that free market economies will run smoothly, steadily producing more wealth. Any problems that may arise are attributed to ‘unnatural monopolies’ particularly the influence of organized labour, which, it is claimed, tends to prevent the free movement of prices and wages based on the forces of demand and supply.

•      What is Classical Economic Liberalism? (4.2)

•       State intervention or involvement in the economy was seen as an aberration, which could distort the economy, reducing it from its optimum position. The role of the state therefore should be restricted to defending private property, upholding contracts, national defense and overseeing the money supply.

•        What is Classical Economic Liberalism? (4.3)
(Adam Smith)

•         The ideas of economic liberalism are rooted in the work of Adam Smith [(1776) 1976]. Smith argues that the economy works best when it is controlled by the forces of supply and demand rather than government interference. Effective allocation of resources and appropriate product pricing would be attained within the context of the freedom of producers to decide what to produce, the freedom of the buyer to choose what to buy, the freedom of the employer to determine who to employ and the freedom of the employee to choose the employer to work for, all depending on the market forces of supply and demand

•        What is Classical Economic Liberalism? (4.4)
(Adam Smith)

•        The market is self-regulating and needs no external guidance because it is controlled by the ‘invincible hand’ of demand and supply.

•        Unemployment and other economic problems can be solved when all stakeholders submit to the dictate of the market. Example: unemployment means that there is excess supply of labour than is demanded at the current price. The unemployed would be employed if they accepted lower wages. Laissez-faire, i.e. let them act, means leave the economy to sort itself out without government interference.

•      Failure of Economic Liberalism

•        The ideas of economic liberalism fell into disrepute with the failure of the free market to maintain economic prosperity in the face of high unemployment and poverty during the Great Depression of the 1930s throughout the industrialized world. 

•        In addition, the Russian revolution frightened the ruling elite by showing that the working class would revolt if reforms were not provided by the state. In this era, even liberals advocated a substantial role for government in the economy.

•       The Rise of Keynesianism(1)

•         The collapse of economic liberalism led to the rise of Keynesianism - so called after the proponent John Maynard Keynes, a leading British economist.

•         Keynesianism advocated state interventionist policies: a programme of full employment as a goal, provision of a safety valve for the weak, government’s involvement in the economy, government overspending when necessary to influence purchasing power and maintain overall aggregate demand.

•         By the end of the 2^nd World War, virtually all Western states had adopted Keynesian interventionist policies

•      The Rise of Keynesianism (2):
World Bank Support

•        Keynesian state interventionist program thus saved capitalism from itself.

•        Even the World Bank supported Keynesian standpoint by providing loans for the reconstruction of Europe after the Second World War and later, from the 1970s, to the governments of the former colonies.  As a result, it was vilified by the Wall Street Journal and others for ‘promoting socialism’ in the developing countries (Leys 2001).

•      Failure of Keynesianism
Mid-1970s

•        Although Keynesian economic policies appeared to work over the thirty years from 1945, in the mid-1970s it could not deal with stagflation, a combination of recession (stagnation) and rising prices (inflation) being experienced in the core capitalist states. This led to mainstream economists returning to classical economic liberalism on the excuse that the economic problems were due to state intervention.

•      The Rise of Neoliberalism or Neoclassical Liberalism

•       The economic crisis of the 1970s in the West led to a resurgence of support for the ideas of classical liberalism and a shift from Keynesianism. This phenomenon is what is referred to as neoliberalism or neoclassical liberalism.

•       What is neoliberalism? (1)

•       Heywood (2003:54) opines that it is a counter-revolutionary ideology in that it aims ‘to halt, and if possible reverse the trend towards ‘big’ government and state intervention that had characterized much of the 20th century’. Heywood (2003: 55) also points out that neoliberalism is a form of market fundamentalism and thus goes beyond classical liberalism in that it opposes any form of political control.

•       What is neoliberalism? (2)

•         Neoliberals perceive existence of public enterprises and/or government involvement in the economy as the obstacle to economic development. They advocate: de-regulation, commercialization and privatization of existing PEs and the promotion of the private sector as the engine of economic growth; an international free market for the major companies, removal and/or reduced subsidies, attacks on trade unions.

•         It also includes the more open use of war to protect the interests of the companies of the major powers, as with the invasion and occupation of Iraq to secure oil for the US market and the recent offer of military support to the Nigerian Government by the British Government to suppress the activities of militants in the Niger Delta who are responding to the criminal neglect and criminal indifference of the state to the welfare of ordinary people in that part of Nigeria.

•      What is neoliberalism? (3)
(Harvey 2005)

•        Harvey has aptly captured the essence of all the component elements of the theories of neoliberalism when he posits:

•        ‘Neoliberalism is in the first instance a theory of political economic practices that proposes that human well being can best be advanced by liberating individual entrepreneurial freedoms and skills within an institutional framework characterized by strong private property rights, free markets, and free trade.

•      What is neoliberalism? (4)
(Harvey 2005)

•         ‘The role of the state is to create and preserve an institutional framework appropriate to such practices. The state has to guarantee, for example, the quality and integrity of money. It must also set up those military, defense, police, and legal structures and functions required to secure private property rights, and to guarantee by force, if need be, the proper functioning of markets.

•         ‘Furthermore, if markets do not exist (in areas such as land, water, education, health care, social security, or environmental pollution) then they must be created, by state action if necessary. But beyond these tasks the state should not venture.

•      What is neoliberalism? (5)
(Harvey 2005)

•       ‘State interventions in markets (once created), must be kept to a bare minimum, because according to the theory, the state cannot possibly possess enough information to second-guess market signals (prices) and because powerful interest groups will inevitably distort and bias state interventions (particularly in democracies) for their own benefit’.

 

•       Implementation of neoliberal agenda
Internationally (1)

•       Neoliberals gained state power with Margaret Thatcher in the UK and especially with Ronald Reagan in the US.  But this was within the context of major political and ideological struggles.

•       Implementation of neoliberal agenda
Internationally (2)

•        Reagan sacked all the US air traffic controllers in 1981 and defeated their strike

•        After a year long coal miners strike in 1984/85, Thatcher succeeded in closing down the coal mining industry which had been one of the main industries in Britain employing over 1 million miners (Rees 2006). 

•        These attacks led to a generalised defeat for the trade unions and so enabled Reagan and Thatcher to implement their policies.

•       Implementation of neoliberal agenda
Internationally (3)

•        When Reagan came to power, he used his voting rights and power to change the World Bank’s President and its philosophy from mid-1981.  As Budhoo said when resigning from the IMF, “President Reagan effectively told us to go out and make the Third World a new bastion of free wheeling capitalism, and how we responded with joy and a sense of mission! …Everything we did from 1983 onward was based on our new sense of mission to have the South ‘privatised’ or die”. (Harvey 2005).

•       Implementation of neoliberal agenda
Internationally (4)

•         Escalating interest rates, worsening terms of trade and another round of oil price rises greatly increased the level of external debts owed by the governments of developing countries (from around $100 billion in 1973 to nearly $900 billion a decade later) and undermined their ability to provide welfare programs, in addition to the impact of overwhelming corruption in many of them.

•         The debt burden gave the World Bank the leverage it needed to implement its newly adopted neoliberalism through structural adjustment policies across the non-industrialised world.

•         By the late 1980’s, over seventy developing countries had been forced to submit to the World Bank and IMF’s SAPs

•         Again, these policies were met with stiff opposition by ordinary people, with strikes and anti-IMF revolts in many countries (Zeilig 2002).

•       Implementation of neoliberal agenda
Internationally (5)

•         Neoliberalism has also spread by the dominance of its ideas. 

•         The World Bank as a major employer of economists, is a major publisher and organises many conferences where the ideas of neoliberalism are promoted.  In addition, its consultants advise all governments on the economic policies they need to adopt to promote economic stability and FDI. 

•         Similarly, these ideas are promoted in the major universities where alternative economic theories such as those of Keynes and Marx are now derided as being outdated.  Adopting neoliberal ideas can be an easy way for academics to gain promotion and advance in their careers internationally.

•       Implementation of neoliberal agenda
Internationally (6)

•       The extent of the entrenchment of neoliberalism led to Susan George (1999) writing:

•       ‘In 1945 or 1950, if you had seriously proposed any of the ideas and policies in today’s standard neoliberal toolkit you would have been laughed off the stage or sent to the insane asylum’

•       Neoliberalism in Nigeria and Africa

•        Nigerian Governments have accepted the neoliberal agenda.

•        This is outlined in the FGN’s current economic blueprint, the National Economic Empowerment and Development Strategy (NEEDS). There are also SEEDS and LEEDS versions of NEEDS.

•        The Nigerian Government is also active, along with South Africa, in promoting neoliberalism across the rest of Africa through the New Partnership for Africa’s Development (NEPAD). The ACP-EU Agreement is in the same category.

•        Threats of ‘Oil Subsidy’ Removal for the Masses, Subsidy Support for Petroleum Marketers (1)

•       It is within the framework of the neoliberal NEEDS document that the constant threat of removing subsidy on petroleum products should be located. Relying on the Report by the British All-Party Parliamentary Group (cited by The Guardian, 23 January 2006 and by Dare Olatunji, The Nation, 29 July 2008: back page), the average cost of producing one barrel of crude oil is only $4.00.

•        Threats of ‘Oil Subsidy’ Removal for the Masses, Subsidy Support for Petroleum Marketers (2)

•        Considering the perennially high price of crude in the international market, downward review of the prices of petroleum products should indeed be witnessed rather than the perennial threats of ‘removing’ oil subsidy and the actual increases in the prices of fuel. While the Federal Government constantly beats the drum of petroleum subsidy removal for the general public, it however gives subsidy support to petroleum marketers.

•        Threats of ‘Oil Subsidy’ Removal for the Masses, Subsidy Support for Petroleum Marketers (3)

•       The Petroleum Products Pricing and Regulatory Agency (PPRA) reveals that the Federal Government has recently reimbursed petroleum marketers, including the NNPC, with the sum of ^45bn as subsidy for the import of petrol and other products for the months of January to May 2008 (Saturday Independent, 19 July 2008:A8), leaving the claim for June and July outstanding.

•      The Failure of Neoliberalism (1)

•        Two decades of neoliberal policies promoted through structural adjustment programmes (more recently renamed poverty reduction strategies) in the so-called third world have not brought improvement in living standards. Rather, economic growth has fallen short of the levels achieved in the 1960’s.  The absolute number of people existing on less than $1 a day has increased and every day 30,000 children still die because of preventable diseases (DfID, 2006).

•      The Failure of Neoliberalism (2)

•         Africa's fragile and marginalised economies went deeper into crisis after the adoption of neoliberal policies. Annual average growth rates fell from a respectable 4 percent in 1970-79 to 1.7 percent in 1980-89 and 0.4 percent in 1990-94 (Capps 2005: 45). Even the World Bank was forced to admit in 2000 that ‘Average income per capita is lower than at the end of the 1960s’ (World Bank 2000: 1), and per capita income in sub-Saharan Africa (excluding South Africa) in 1997 was only two thirds the level of 1970 and more than “40 percent of its 600 million people live below the internationally recognized poverty line of $1 a day” (World Bank, 2000: 10).

•       The Failure of Neoliberalism (Nigeria)

•         Nigeria is rich – endowed with huge mineral resources and large population. Nigeria is the largest oil producer in Africa and the seventh largest in the world. In the last five decades or so, an estimated sum of $400bn was realized from sale of crude oil alone in the international market. This was several times more than the amount that was used to rebuild the whole of Western Europe after the massive destruction produced by the 2nd World War. In terms of population, it is the most populous country in Africa. One out of every five persons in Sub-Saharan Africa is a Nigerian. It has 47% of West Africa’s population. In global terms, Nigeria’s population constitutes 2% of the World population and is expected to be among the five or six most populated countries in the world by 2025. (APRM, 2008, paragraph 420 p. 141).

•       Resource Curse: Rich Country, Poor people (1)

•         ‘Resource curse’ is an economic term, referring to the co-existence of vast natural resource wealth and extreme personal poverty. In other words, Nigeria is a country of extreme paradoxes, with widespread and endemic poverty in the midst of plenty. In spite of the oil wealth, there is an alarming increase in incidence of poverty, which has turned the country into host to 6% of the core chronically poor in the world. (APRM, 2008, paragraph 427 p.142). This means that Nigeria currently hosts the third largest concentration of poor people in the world after China and India and is among the top 20 countries in the world with the widest gap between the rich and the poor.

•       Resource Curse: Rich Country, Poor people (2)

•        It is estimated that about half of the 140 million population, i.e.70 million, lives on less than a dollar a day and up to 70 per cent (i.e. about 100m altogether) of the people live on less than 2 dollars a day. The incidence of poverty is higher even compared to countries in the West African region, like Ghana and the Ivory Coast (44 per cent and 10 per cent respectively living on less than a dollar a day’ (APRM, 2008, paragraph 696 p. 219).

•       Resource Curse: Rich Country, Poor people (3)

•         Nigeria ranks low on human development indices. The UNDP’s Human Development Report for 2007/8 ranks Nigeria at 157 out of 177 countries (20th poorest country in the world) – down from 148 out of 173 countries (25th poorest country) in 2003. The country’s Human Development Index (HDI) of 0.453 in 2005 is lower than the average HDI for Sub-Saharan Africa of 0.515, only slightly above the 0.434 average for ECOWAS countries. The road network (km per 1000 inhabitants), rail systems and electricity generation (kilowatt hours per inhabitant) are well below the figures for peer countries such as Indonesia and South Africa. (APRM, 2008, Paragraph 450 p.147).

•       Power Supply

•       The Chairman of the House of Representatives Committee on Power and Steel Ndudi Godwin Elumelu has said that contrary to the government claim of generating 3000 megawatts, Nigeria is actually generating less than 1000 MW currently (The Nation, 30 July 2008:6).

•       Education

•       Out of 1.2million applicants for university admissions annually, only 148,323 places are available (APRM, 2008:301-302).

•       The way in which education has been de-prioritized is shown in the attitude of governments to a month and a day (30 June to 29 July 2008) strike by NUT members.

•       Housing

•         The government estimates the housing deficit at 12-17 million units, which translates into lack of decent housing for 72-102 million people, given the average household size of six persons per household.

•         In spite of the deficit, the declared state policy being implemented is sale of government housing units rather than providing shelter as provided in Section 16(2)(d) of the Constitution of the Federal Republic of Nigeria, 1999 and Employees Housing Act, CAP 107 Laws of the Federation of Nigeria, 1990, which prescribes that an employer having not less than 500 employees should provide furnished housing units for them. Contrary to the constitutional and legal provisions, the common experience is forceful eviction from public housing units.

•       Health

•       Government’s per capita expenditure on health is at less than US$5 compared to the $34 per capita recommended by the World Health Organization for developing countries (APRM, 2008: para 1038 p.302). Life expectancy in Nigeria, as reported by the CSAR, is 43. (APRM, 2008, paragraph 1040 p. 302).

•       Unemployment

•         Publications by the National Manpower Board and the Federal Bureau of Statistics indicate that only about 10% of graduates released annually into the labour market from tertiary institutions in Nigeria are employed (Saturday Independent, 19 July 2008:A8). Thus, deaths occur regularly during recruiting processes.

•         43 persons died in the recent recruitment exercise into the Nigeria Prisons Service (NPS) wherein over 300,000 applied for less than 7,000 vacancies (The Nation, 30 July 2008:3).  Similarly, 20 persons died during the recruitment exercise into the Nigeria Immigration Service (NIS), as 195,000 scrambled desperately for 3000

 

•       Opposition to Unionization

•       In the interest of keeping down wage bills and maximizing profit, there is a mounting hostility to unionization, under neoliberal order. The rule in the privatized enterprises tends to be ban on trade union membership and activity. Particularly in the banking industry and new tertiary institutions of learning being set up in both the private and public sectors, unions as well as strikes are purportedly outlawed.

•       Primary Cause of Poverty: Corruption or Neoliberal Capitalist Ideology? (1)

•        The Report of the African Peer Review Mechanism (2008) however attributes the primary cause of pervasive poverty in Nigeria to corruption. The APRM Report laments:

•        Why does the greatest oil producer in sub-Saharan Africa have the word’s third largest concentration of poor people? There is virtual agreement among observers that corruption - political and economic - primarily explains poverty in Nigeria.

•       Primary Cause of Poverty: Corruption or Neoliberal Capitalist Ideology? (2)

•         Transparency International’s (TI’s) 2006 Corruption Perception Index ranked Nigeria more corrupt than 37 out of the 45 African countries for which relevant data were available. Globally, Nigeria ranked 142 out of 164 countries. TI’s 2007 Corruption perception Index ranked Nigeria 147th out of 179 countries. The APRM asserts that without eradication of corruption, Nigerians will continue to be poor and the country will not meet its target of being one of the 20 top global economies by 2020 as the Federal Government has declared. (APRM Report, 2008: pp. 59 & 233).

•      Neoliberalism, not corruption is primary cause of poverty

•         It is indisputable that corruption is a big problem in Nigeria. It cannot be denied that there is a relationship between corruption and development. However, in terms of determining and influencing the direction of the class struggle, it is misleading to attribute the primary cause of poverty in the society to corruption. The primary cause of societal poverty is the capitalist system of which neoliberalism is the latest contemporary phase. The implementation of the neoliberal agenda deepens economic and political exclusion, which accentuates corruption rather than attenuating it.

•         We should not allow attention to be diverted from the root cause of pervasive poverty – the capitalist neoliberal economic and political practices

•       The Way Forward (1)

•       The everyday lives of the working people are continuously affected by the detrimental impact of neoliberal economic policies. There is a need to contest the rationale for continued implementation of policies that have brought only doom and woes to working people’s homes and lives. There is a need to insist on the expansion of access of ordinary people to basic social services as fundamental rights.

•       The Way Forward (2)

•        Internationally, there is enough wealth to abolish poverty.

•        The International Labour Organization (ILO) has estimated that only about 2 per cent of the world GDP committed to social good would abolish poverty on the face of the earth.

•        What stands in the way of allocating 2 per cent of the world GDP is the priority given to the protection of the profits for a few, rather than the needs of the overwhelming majority of humanity.

•       The Way Forward (3)

•        We must insist that the minimum condition for any government is that the state uses common societal resources to meet the needs of ordinary people, rather than the greed of a few for profit and theft.

•        Neoliberalism will not disappear on its own accord. It has to be fought to a standstill by the masses standing on their feet and demanding a fundamental change to the neoliberal order.

•       The Way Forward (4)

•        That fighting to defeat neoliberalism and all its attendant negative consequences is possible can be seen in the reversal of the sale of unity schools (Federal Government owned secondary schools), the establishment of committees, which include labour representatives to review sale of some key public enterprises, including the refineries (See for example, Saturday Sun, 22 September 2007: 11), the 27.5% rise in basic salary of NUT members after they struck recently for the implementation of TSS, etc.

•        Dare to fight, dare to win!